Governor: New airport terminal example of Prescott’s strong economic development

Arriving at the Prescott Regional Airport Thursday, Feb. 13, 2020, Gov. Doug Ducey, center, greets Prescott Mayor Greg Mengarelli, left, and Airport Director Robin Sobotta, right. As a part of the governor’s visit to Prescott, he received an update on progress on the city’s new airport terminal project. (Cindy Barks/Courier)

By Cindy Barks | Originally Published in The Daily Courier, February 14, 2020 9:29 p.m.

The $1.25 million that the State of Arizona is putting into Prescott’s new airport terinal is expected to be money well-spent, Gov. Doug Ducey told city officials this week.

“We know the return on investment is going to be large,” Ducey said during a brief stop at the Prescott Regional Airport Thursday morning, Feb. 13.

In town for a “State of the State” talk with Prescott-area leaders and business people, Ducey stopped first at the airport to get a first-hand look at the construction that is underway on the new $15 million passenger-terminal project.

There, he met with Mayor Greg Mengarelli, Airport Director Robin Sobotta, and other city officials, along with representatives of project contractor, Willmeng Construction.

With backhoes and dump trucks rumbling in the background, Sobotta told Ducey that the airport has already served about 77,000 passengers since new commercial carrier United Express, operated by SkyWest Airlines, began service in August 2018.

The airport’s strong showing helped Prescott’s case in the Federal Aviation Administration’s (FAA) recent award of $10 million to the new-terminal project, Sobotta added.

Along with the FAA money, the city also received a $1 million allocation from the state early on, and another $250,000 as a match toward the $10 million.

During a brief meeting with Mengarelli and other City Council members inside the existing 1940s-era airport terminal, the governor cited the new terminal project as an example of strong economic development in Prescott and the rest of the state.“It’s really nice for me as a governor — somebody who wants to be the chief spokesperson for the state — to not only be able to brag about what’s happening in the urban core, but all over our state,” Ducey said.

Toward that progress, he said, “Yavapai County and Prescott really lead the way in what’s possible for the rest of America. It’s a community that comes together.”

Mengarelli agreed, telling the governor, “We’re kind of hitting a stride.”

PROJECT PROGRESS

Willmeng Principal in Charge Keith Sabia, and President and CEO James Murphy reported that the terminal project is currently in the utility relocation phase. In recent weeks, Sabia said, “We’ve touched every single utility.”

At times, the underground discovery project has turned up surprises from the past. For instance, Sobotta said the work revealed an abandoned well, along with several old water lines. “There were some unforeseen conditions with older utility lines,” she said, adding that, in some cases, the lines dated back to the 1950s and 1960s.

Although the unforeseen conditions caused some delays in the project, Sobotta said the time likely would be made up in coming months.

Sabia noted that foundation work would likely begin by next month, and the building should be enclosed by this summer. The project is expected to be complete by this time next year.

Sobotta said the work could be substantially complete by January 2021, with all of the final punch-list details completed by mid-February.

FLIGHT IMPROVEMENTS

Also related to the continued strong flight numbers will be some improvements in the flight schedule in months to come.

Sobotta noted that United Express had earlier announced an additional daily flight to Denver, beginning in March.

Also, beginning in about June, the airline plans to switch its daily Prescott-to-Los Angeles flight to 6:30 a.m. — from its current 6:15 p.m. time slot.

Sobotta said the morning flight time would be advantageous for business travelers, as well as those planning to make connections to other locations at Los Angeles International Airport.

Still to come in the airport’s ongoing developments is a possible “land-side study” that will look into issues such as parking, shuttles and rental cars.

The study would require approval by the Prescott City Council, and Sobotta said the matter could go to the council within the next three months.

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Three Apartment Deals in Tucson sell for $4.15 million.

TUCSON, Arizona — Joseph Bernard Investment Real Estate closed on three multifamily properties in Tucson this week with an aggregate sale price of $4.15 million for 79 units.

Fort Lowell Place with 40 unit apartment complex at 3475 E Fort Lowell Rd., Tucson, AZ 85716 sold for $2.05 million ($51,250 per unit) to Dash II Investments. Joseph Chaplik of Joseph Bernard Investment Real Estate represented the investor. The seller, Winged Foot Investment Services Limited Partnership, LLLP & JHR Investment Services Limited Partnership, LLLP were self-represented in the transaction.

Mohave Apartments, with 32 units at 610 E Mohave Rd., Tucson, AZ 85705 sold for $1.65 million ($51,563 per unit) to Joseph Chaplik of Joseph Bernard Investment Real Estate. Chaplik represented himself in the transaction. The seller, Winged Foot Investment Services Limited Partnership, LLLP & JHR Investment Services Limited Partnership, LLLP were self-represented in the transaction.

A third property at E 30^th St., Tucson, AZ 85711 with 7 units sold to Dash II Investment, LLC for $450,000 ($64,286 per unit). Joseph Chaplik of Joseph Bernard Investment Real Estate represented the investor. The seller, Winged Foot Investment Services Limited Partnership, LLLP & JHR Investment Services Limited Partnership, LLLP were self-represented in the transaction.

For more information, Chaplik should be reached at 480 305-5600.

Phoenix 4th Quarter Office Space Net Absorption Topped 1 Million Square Feet

2019 Brought 3.4 Million-Square-Feet of New Office Space to Inventory

Phoenix, Arizona – The Greater Phoenix office market experienced its best year since 2008, posting very strong net absorption and adding more than 3.4 million-square-feet of new space to the inventory.

The metropolitan area has been recognized with three of the Nation’s top ten “Best Cities for Jobs,” as researched by WalletHub. Scottsdale, Chandler, and Tempe were all ranked, based on job growth in 2019 and our healthy economy. Sizable job creation announcements from companies like DoorDash, Open Door, and Deloitte all contributed to office leasing. The 12-month period ending in November brought 56,500 net new jobs, increasing the workforce by 2.6 percent.

Positive net absorption exceeded one million square feet during fourth quarter 2019. This marked the 31st consecutive quarter of positive net absorption. The largest deals executed during fourth quarter were located found in Tempe, Chandler, and the Scottsdale Airpark. DoorDash leased 345,795-square-feet at The Grand at Papago Park Phase II. OpenDoor expanded its position in Greater Phoenix with a lease for 100,807 square feet at The Watermark in Tempe. Choice Hotels leased 150,000-square-feet at Cavasson in Scottsdale.

Vacancy in the office sector hit 12.7 percent at the end of the year, following a drop of 120 bps during 2019. The vacancy rate dropped 70 bps during fourth quarter. These improvements in vacancy are evident in all classes of office buildings, which reflects the overall strength of the local office market. Southwest Phoenix overtook Tempe as the submarket with the lowest vacancy rate at just 6.5 percent. Tempe posted 7.5 percent vacancy, while Midtown/Central Phoenix sits at 8.1 percent vacancy, Superstition Corridor with 9.6 percent, and the Scottsdale Central submarket at 10.3 percent vacancy.

A decline in vacancy is putting pressure on rental rates, which increased 4.4 percent from a year ago. The average asking rental rate hit $24.62 per square foot at the end of 2019. Asking rents are expected to moderately rise during 2020 as new developments push up rates.

Construction activity added 3.4 million square feet to the office inventory during 2019, with fourth quarter adding more than 700,000-square-feet. More than 2.5 million-square-feet of new space are under construction, which falls in line with levels of the past five years that averaged 2.32 million-square-feet per year. Projects currently under construction are close to 60 percent pre-leased. Tempe and Scottsdale Airpark lead the market in construction with 1.08 million square feet and 731,017-square-feet underway. Robust office construction is expected to continue, focused largely along the east 101 Loop, Tempe Town Lake, and Chandler.

Office investment sales exceeded one billion dollars in 63 transactions involving 4.8 million square feet during 2019. The median price was $175 per square foot, with cap rates resting at 7.6 percent. The two most notable transactions driving the increase were the sale of The Grand at Papago Phase I for $422 per square foot and The Biltmore Center at $328 per square foot.
The outlook for Greater Phoenix remains bright as local companies continue to expand and new companies bring operations to the city. The Federal Reserve’s dovish approach on rates and negative rates in Europe will contribute to our strengthening real estate market. As other investments offer lower yields, investors will seek cash flow vehicles such as commercial real estate in our dynamic, Southwest city.

To read the full report click here: Arizona Office Report 4Q 2019